News Flash! Wall Street Analysts Get Tough

Wall Street analysts get bashed around for being too quick to buy into management talking points. But they found some gumption today in dealing with Barnes & Noble, as they pressed hard for real answers about the digital book business.

Bloomberg News

Barnes & Noble has for months been talking up its Nook e-reader and associated digital businesses, and the company has pledged to plow more money into expanding this business. The unfortunate side result is spiraling losses — $163 million on an Ebitda basis in the fiscal year ended April 30.

That despite Barnes & Noble boasting about $250 million in comparable sales for Nook e-readers, accessories, digital books and other associated sales. Don’t worry, Barnes & Noble says. By 2014 or 2015, the electronic book market will be a $5 billion to $7 billion annual business. We’ll ride that wave. Our digital business will be profitable eventually, Barnes & Noble has explained.

Again and again, the analysts pressed and Barnes & Noble wouldn’t say much at all. What’s the direction of orders by Nook customers? What are your expectation for future e-book prices? When will your e-book business be profitable? Again, when do you think your e-book business will be profitable? When might the board review the takeover proposal from Liberty Media? You know, the one that might salvage what had been a stock price below $10 a share. Sorry, can’t talk about that either.

Wall Street scribblers started to get a little testy. (Pleasantly testy, it must be said.)

Michael Prober, Clovis Capital Management on the Barnes & Noble conference call: “Will you give us more information about some of the metrics to help us value the Nook opportunity over the next couple months? Because if Liberty is going to get that information I think we as shareholders should get that information to appropriately value the company. Because right now it is very difficult…for investors to look out a couple years and see the value of the business….This may be the last time we speak before the independent committee gives their recommendation. I think it will be helpful before it gets put to a vote that you give that information out.”

“We hear your comments and we’ll keep you apprised as we go forward,” said a slightly taken-back Barnes & Noble CEO William Lynch.

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